Despite National Economic Growth, Families Struggling to Get By

New Research Finds Poor Policy Decisions Fuel Financial Insecurity

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Washington, D.C. – Despite lower unemployment nationally, a modest decline in the poverty rate and a booming stock market, there is growing evidence that these indicators of economic growth aren’t translating into widely shared prosperity at the household level, according to new research from Prosperity Now (formerly CFED). Future prosperity for millions of American families is at risk.

The 2018 Prosperity Now Scorecard found that despite these declining rates of unemployment, workers of color remain twice as likely as White workers to be without a job. More importantly, the Scorecard finds evidence that having a job doesn’t mean seeing a payoff: while average annual pay is increasing, nearly one in four jobs is in an occupation that pays below the federal poverty level, and six states experienced increases in the number of low-wage jobs.

The Scorecard also examines the policy choices of lawmakers at all level of government, and how those choices affect the ability of households—especially households of color and those with limited income—to create a more prosperous future. Those policy choices, not the choices of working families, are in large part prohibiting prosperity for all but the wealthiest. The report’s authors find that our national focus on income rather than wealth and a series of national policy decisions driven by a set of assumptions and stereotypes< about working families are stifling our ability to address the drivers of poverty and inequality.

For example, low-income families are too often told to get an education to succeed, and nationally, rates of college completion are rising for people at all levels of income. However, new data on the loans being used to finance higher education point to a looming crisis: nationally, 22% of all people with debt have student loan debt, and the median amount of that debt increased by 21.4% between 2010 and 2017 (from $14,588 to $17,711). Moreover, borrowers default on student loans at nearly twice the rate that they default on credit card debt.

Recent actions by the Trump administration and its congressional allies will make things worse. The “Tax Cuts and Jobs Act” recently signed into law disproportionately benefits wealthy individuals and corporations. Prosperity Now estimates that the new tax law will translate to a $37,000 tax cut for those earning at least $732,800 in 2018, 82% of whom are White. On the other hand, families earning less than $25,000, 41.6% of whom are families of color, will see a meager $60 in tax savings. Moreover, to fill the $1.5 trillion hole left in the budget by the tax legislation, Congressional leaders have pledged to cut safety net programs such as Medicare and Medicaid.

There are also early signs that the positive trends in the health outcomes seen since the passage of the Affordable Care Act are reversing. The number of Americans reporting that they are in poor or fair health increased slightly from last year, and while the overall number of people forgoing a doctor visit due to cost declined nationally, it rose in 26 states. Racial disparities are particularly stark in this area, with 16.3% of African Americans and 20.8% of Hispanics forgoing visits because of cost, compared to only 10.5% of Whites. With less income and fewer opportunities to build wealth, the erosion of our social safety net could spell disaster for millions of households.

“Massive tax breaks may be good for the very wealthy, but they leave millions of hard-working Americans behind,” said Andrea Levere, president of Prosperity Now. “Our research shows that there are troubling signs beneath the economic surface. It’s more and more difficult to build wealth. Affordable housing is harder to find. Most disturbingly, racial disparities persist. Policymakers should focus on helping low- and moderate-income families succeed.”

Published annually, the Prosperity Now Scorecard offers the most comprehensive look available at Americans’ ability to save and build wealth, stay out of poverty and create a more prosperous future. This year’s Scorecard assesses all 50 states and the District of Columbia on 115 outcome and policy measures spanning five issue areas: Financial Assets & Income, Businesses & Jobs, Homeownership & Housing, Health Care and Education.

Among the Scorecard’s other key national findings:

More than one in three households (36.8%) does not have enough liquid savings to replace income at the poverty level for just three months if they lose a job or suffer another significant income loss. However, this liquid asset poverty is much more prevalent for households of color: a startling 60.7% of Latino households and 56.7% of Black households are liquid asset poor, compared to 28.2% of White households.

Nearly one in four consumers (24.5%) has at least one account in collections on their credit report, leaving them vulnerable to having their wages and bank accounts garnished.

Since last year’s Scorecard, the homeownership rate has remained essentially the same at 63%, while homes have gotten more expensive. Median home values have increased 4.1% (more than $8,000), while median household income has increased just 2%, or roughly $1,138.

New Scorecard data show that people with disabilities face significant barriers to financial stability. They are almost twice as likely to live in income poverty and half as likely to have a four-year college degree than those without a disability. Half (50.3%) of households with an adult member with a disability are also liquid asset poor.

The Scorecard found that policy decisions at the state and local levels can have a profound impact on families. Five states—California, Connecticut, Illinois, Maryland and Oregon—have forged ahead in their efforts to implement statewide Auto-IRAs. Despite the barriers to doing so erected by the federal government, these states are taking leadership in providing retirement savings options for the estimated 13 million employees in their states without access to a retirement account through their employer. Meanwhile, Montana, South Carolina and Hawaii established state Earned Income Tax Credits in 2017, helping to put more money in the pockets of low-income working residents of their states. But not all states are committed to investing in their residents. Lowlights from state action in the past year include Ohio and Iowa passing measures preventing local municipalities from passing minimum wage laws.

“As Congress and the White House continue to push policies that harm low- and moderate-income families, it is more important than ever for states to address the drivers of poverty and inequity,” said Solana Rice, director of state and local policy at Prosperity Now. “Good policy at all levels of government can go a long way toward helping every American achieve prosperity.”

Prosperity Nowbelieves that everyone deserves a chance to prosper. Since 1979, we have helped make it possible for millions of people, especially people of color and those of limited incomes, to achieve financial security, stability and, ultimately, prosperity. We offer a unique combination of scalable practical solutions, in-depth research and proven policy solutions, all aimed at building wealth for those who need it most.

If current federal wealth-building policies remain in place, it will take the average African-American family 228 years to amass the same amount of wealth that white families have today and it will take Latino families 84 years to reach that goal, according to a new report from Prosperity Now and the Institute for Policy Studies (IPS).